Investing while in debt is a touchy subject for obvious reasons. Some believe that investing while in debt is an effective financial decision while others believe it is counterproductive. Money owed increases with time due to compound interest. With no guarantee of returns, investors who have debt put themselves at risk of bankruptcy. Many may, however, find that waiting to invest presents costs in terms of unrealized profits that could have been made from investments. Continue reading
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Debt is nothing new to most Americans. In fact, DebtConsolidation.com’s guide shows that, about a third of Americans have debt in collections. So, if you’re in debt, and you feel like you’re alone, don’t worry… you’re not! There’s another common misconception associated with debt that needs to be debunked. That misconception is that if you’re in debt, you have to deal with the harassment associated with debt collectors looking to cash in on money you simply don’t have!
Introducing The Fair Debt Collection Practices Act
Debt collectors have gotten out of hand in the past, and chances are that they will do so in the future. That’s why, on September 20, 1977, the Fair Debt Collection Practices Act (FDCPA) was created. Essentially, the act was a set of regulatory rules with regard to how debt collectors can legally go about collecting debt before it becomes a harassment issue. Since its creation, the FDCPA has been amended, but its sole purpose has never changed. That purpose is to protect the rights of borrowers. Here are the most important ways in which the FDCPA protects borrowers:
- When Collectors Can Call – You may think that debt collectors can call whenever they want to. However, that couldn’t be further from the truth. In fact, unless you agree to it, debt collectors are not allowed to call you before 8:00 a.m. or after 9:00 p.m.
- You Can Make Debt Collectors Stop Calling – While it’s a good idea to talk to a debt collector that calls you at least once to get an idea of why they’re calling, you can actually force them to stop calling you at any time. All you need to do is tell them in writing. When doing so, write a letter telling the collector that you do not want them calling you anymore. After making a copy of the letter, send the original draft via certified mail and pay for a return receipt. This gives you the ability to document that you told them to stop calling and puts them on notice that you’re not playing any games!
- How Collectors Can Go About Collecting – The FDCPA also provides for a slew of ways in which collectors cannot try to collect. For instance, harassment, including threats, publication of debts to the public, obscene language and repeatedly using the phone to annoy borrowers is illegal. Also, collectors may not use false statements, use statements insinuating legal repercussions or move forward with otherwise unfair practices in the collection of a debt.
What To Do If A Collector Has Broken These Laws
If a debt collector has broken the rules with regard to the FDCPA, you don’t have to sit back and accept the harassment. Instead, you can fight back. To do so, start by contacting the debt collector in writing stating the ways that they have broken the law according to the FDCPA and demand that the harassment comes to an end. Usually, this will be enough to silence collector for good. However, if it’s not, it’s also not your last step.
If the debt collector ignores your requests to end harassment in the attempt to collect a debt, it’s time to move on to further action. First and foremost, give the Attorney General a call. If you’re not quite sure who the Attorney General is in your area, here’s a great resource for figuring that out.
Once you’ve reached out to the Attorney General, if the harassment continues, it’s time to reach out to an attorney. That’s right, there can be monetary repercussions to debt collectors that don’t follow the rules, and if your rights have been ignored, an attorney can help you sue for damages. A great way to find an attorney to help is to call the state Bar in your area. Every state Bar will have an attorney referral service that is free to use and will point you in the right direction.
When you’re in debt, you may feel as though collectors are free to do as they will until you pay. However, that’s not the case. By knowing your rights, you can be sure that debt collectors don’t ignore them. So, if you’re being harassed, today is the day to put an end to it!
At any given moment, we will need a loan to help us meet our financial goals. Whether it is for personal use, for a major, big-ticket purchase, or get by to the next paycheck, it’s important that we find the right loan that will make purchasing easy and help improve our credit. Here is a list of various types of loans, how they function, and how it could be used to help you meet your needs.
Line of Credit Loan
A line of credit loan is similar to a credit card. You apply at a bank and they extend a line of credit to you in the form of a loan. You can access that line of credit at any given moment to use as you see fit. Requirements for a line of credit will vary a little bit based upon the bank, but most require that you are 18, have a good credit score, and meet specific income requirements. Some banks require that you have a checking or savings account with them. This type of loan is available to anyone who meets the requirements but is especially popular for the small business person who may need to access the credit for business purposes.
Same Day Loans
If you have bad credit and yet find yourself in dire need of help, the same day loan is what will most likely be available to you. They often don’t perform a background check and can process the loan the same day, usually within a few minutes to a couple of hours. They require that you are 18 years old and possess a checking account that can transfer payments back to them on an agreed schedule. This is often used by people who find themselves in need of paying a bill or covering their rent due to financial hardship. However, these types of loans are wrought with incredibly high-interest rates and equally high fees. You may borrow $600 initially but then pay $300/month over the next 6 months. These loans are not recommended if you can find any other way to cover your bill.
Pay Day Loans
Pay day loans are designed to help you bridge your finances in between paychecks. They are easy to obtain by simply being 18 and providing proof of income. These are often sought after by folks living paycheck to paycheck. However, like the same day loan, they are riddled with fees and high interest rates. More than likely, you will spend your entire next paycheck paying off your loan and then finding yourself still in dire need of money. It can be a vicious cycle that you do not want to find yourself in and we recommend you avoid these loans at all costs.
A personal loan is often obtained through the bank or credit union and provide you the ability to make a fairly large purchase, such as new computer equipment or to pay for car repairs. Others choose to use a personal loan to pay off outstanding debt so they can avoid higher interest rates. You must be 18 and verify your income, additionally proving that you have the income to pay off the loan. Many banks or credit unions require that you have a bank account with them, but not all do. Credit unions often offer discounts to your pay schedule if you have an account and agree to transfer the payments out of the account on the due date.
Before applying for any loan, inquire about interest rates! The better your credit, the better deals you can find. If you have credit that isn’t that great or even downright bad, ask if the creditor will be reporting your payments to the credit bureaus. If they are not, avoid taking the loan. You want to make timely payments and have it reported to improve your credit!
Nearly three out of every four students graduating from a four-year college or university will have some sort of debt. Despite the fact that college is supposed to be some of the best years of your life, paying off your student debt after you have graduated can seem like a mountain too big to climb for many.
According to a recent Forbes article, the average student graduating from college has over $37,000 in student loan debt. This number is expected to continue increasing due to the constant hikes in college tuition throughout the United States. Whether you have graduated or are about to graduate from college with debt, there are ways to help you manage the financial burden.
Example 1 on How to Pay Off Student Debt:
Susie went to a four-year state school. Fortunately, she had academic scholarships to help pay for schooling, and she also lived at home during the four years. She graduated with $10,000 in student debt. Susie was able to get a job right after school in the town where she went to school and where her family lived. She continued to live at home and made a budget. Susie focused on keeping her expenses low and used every bit of extra money she had left over in her budget to pay towards her loans. Most importantly though was that she included a category in her budget for paying off her student loans each month. She devoted $500 per month towards her student loans. Because of her frugal living and her devotion to get out of debt, she was able to pay off the entire balance of her loans in less than two years!
Example 2 on How to Pay Off Student Debt:
After graduating high school, Chris decided to attend a private university to continue his studies. The tuition at his university was expensive, but with the help of aid and an alumni scholarship he was able to limit the costs. Regardless, Chris graduated with $45,000 of student debt after it was all over. Chris accepted a job with a non-profit after graduation. Even though he wouldn’t be making much money, he felt a calling to do something he passionately cared about. Because of his situation, a high amount of student debt and a low salary, he enrolled in an Income Based Repayment Program. This allowed Chris to avoid the high monthly payments his loans would typically have required him to pay and instead allowed him to pay a small percent of his income every month. Even with this program, Chris still had to create a budget, but the repayment of his student loans was not as high of a priority as it was for Susie. Nonetheless, Chris was able to still live comfortably, doing what he loved, while also meeting his student loan obligations.
The examples above illustrate a couple of real-life situations that people face when paying off student debt. To some, paying off the debt is a very high priority. To others, not so much. Only you can decide how quickly you would like to pay off student loans. The commonality that both Susie and Chris shared in both examples was that they created a budget. Susie created a budget that allowed her to aggressively pay off her debt. Chris created a budget that allowed him to live within his means but also meet his payment every month. Regardless of which category you fall in, creating a budget is a great foundation to tackling any debt, especially student loans.
Having a credit score can have many benefits. Wait, having a good or great credit score can have many benefits. As we go through life, credit becomes an essential tool for an individual to progress through society. You can use credit to purchase everyday items, a car or a house. Without credit, some of the essential purchases we rely on to carry us through our lives every day would be unavailable, such as a car for transportation to and from work. Having a credit score and a good one at that can allow you to get the best deal on large purchases and also helps create a financially responsible person. But just how does one get a starting credit score, and where do you begin? I will lay out some of the easiest ways to start down the path of a good credit score.
Step 1 to getting a starting credit score:
The first thing you need to do to get a starting credit score is simply to get credit. The easiest way to do this that I recommend is by opening up a $0 annual fee credit card. Your monthly limit won’t be all that much, most likely less than $1000. Commit to making a couple of easy purchases on it every month and paying it off at its due date. For example, a couple of tanks of gas or a visit to the grocery store is all it takes to start building your credit. It is vital to pay off the full amount after a month’s time before the card’s due date.
Step 2 to getting a starting credit score:
The second step to building a starting credit score is to continue purchases with your credit card and meet the monthly payment date, along with exploring an additional option of building your score. If you rent an apartment, sometimes the apartment complex allows you to report your on-time payments to credit agencies. Additionally, if you have student loans you are paying back, this also will show up on one’s credit report. Time is a big factor in your credit score. It usually takes at least six months for you to build your first credit score. If you make on-time payments in full, you can expect a score anywhere in the range of 675 to 740.
Step 3 to getting a starting credit score:
By step 3, you should already have shown a positive pattern to creditors through making payments in a timely manner. The most important part of this step is just to be patient. Building a good or great credit score takes time. Two of the bigger factors that impact your credit score are the length of time you have had credit and the number of accounts you have that required credit. Chances are as you start building your credit both of these factors won’t be too much in your favor.
In summary, there are many benefits to building a good credit score, but it all boils down to a few simple factors. Firstly, you need to begin building credit through a $0 annual fee credit card, student loan repayment, etc. Secondly, you MUST make your full payments and make them ON TIME. Finally, you need to be patient. It takes time to build a great credit score, but if you budget correctly and make sure not to spend above your income level then a great score will eventually come.
I recently spoke with an individual who was excited to begin his budget. He downloaded the spreadsheet available on my site and asked me to look over it. Everything looked good except for one thing I noted. This individual had a category as follows:
Credit Card Payment (minimum)
This shocked me for a number of reasons. First and foremost, the minimum part that was included. Secondly, paying off your credit cards is not an expense. For example, if you go to the grocery store and spend $50.00 on groceries but apply the charge to your credit card, then your budget should reflect a $50.00 purchase on groceries. The credit card is simply a means to pay for it. Finally, I recognized that this individual had credit card debt, and he assumed paying off in minimum installments would eliminate it. Yes, theoretically, as long as no further debt was incurred, but it would take a while.
This ultimately led me to the following conclusion. This individual had a significant amount of money remaining in their budget every month. I advised him that if I was in his situation I would do the following:
- Make sure I am able to cover all of my necessary expenses in the budget. This would include rent, gas, food, student loans, etc.
- See where some expenses can be cut. Bringing his lunch to work versus going out to eat might be the smartest financial decision until he gets his credit card debt under control.
- Use any extra money at the end of the month to pay off the remaining balance on the credit card. Credit cards are notorious for having extremely high-interest rates. The quicker you tackle this type of debt, the more you save.
- Set a goal for paying off the credit card debt. We agreed by the end of the calendar year. Once the debt is paid off we could redo the budget and include categories for savings, retirement, and other financial goals.
Credit card debt can be a nasty thing, but a budgeting approach to handling it can make your financial life much better. Use a budget to pay off your debt if you have any, then you will be able to create additional space to begin planning for your financial future more aggressively.
Budget Smart, Invest Wise
As you should know, we are all in the midst of debates among both Democrats and Republicans for the 2016 Presidential candidacy. While there are many social issues these candidates have discussed, there are also a few fiscal issues discussed as well.
The majority of the fiscal issues stem around America’s growing debt burden (which is now over $18 trillion). However, another topic that has taken somewhat of a backseat, but is still discussed in these debates is the topic of social security.
Some candidates want to push back the retirement age, others would like to cut the benefits paid out by the program. One suggests raising the cap on taxable income for social security. To view each candidates stance, CLICK HERE.
Americans who are retired or are planning on retiring in the future and relying on social security income to help fund that retirement should be assured that this topic has relevance to these debates. Although we cannot predict who the next president will be, or what ultimately will happen to the social security program, we can do our best to make sure that we are well off no matter what is decided.
Having IRA’s, pensions, and 401k plans are ways to ensure a safe retirement. Maxing out contributions to these retirement vehicles where applicable can give one peace of mind in the future. What will happen with social security in the next 20, 30, or 50 years? Nobody knows. However, a broad retirement plan can help lessen stress and worry about what might occur.
Budget Smart, Invest Wise
As we inch ever closer to another Halloween evening there is a spooky statistic that I recently read about. Business Insider recently published an article that today’s college graduate can expect to retire at age 75. Yes, age 75, which was coincidentally the average life span of an American just 24 years ago.
Why age 75?
High student debt, rising rents, and social security viability are just a few of the reasons.
The average student loan debt sits just above $35,000. As someone who graduated a mere 3.5 years ago who had just over $30,000, I can attest that a large portion of one’s income goes to paying down that debt. And when you use the majority of your income to pay down debt what does that do? Prevents one from saving for retirement. Prevents one from saving to buy a house, thus subjecting oneself to the ever-increasing rents throughout the country.
By the time today’s graduating seniors look to retire, life expectancy could very easily be well into the ’90s. Fifteen or so years of retirement might seem like a plausible plan for many. There are ways to ensure that you don’t have to wait until 75 for retirement though. It starts with budgeting, followed by saving and paying down debt. Finally, it is followed up with living within your means and not succumbing to societal pressures to purchase all of the nice things.
Don’t be a part of the spooky statistic.
Budget Smart, Invest Wise
How can you have $400 million to your name and go broke? I don’t know, ask Mike Tyson. Star athletes going broke is not something new. It has been happening ever since their paychecks began growing to astronomical amounts. Although many of us will never have anywhere near the money that these individuals did, there is still a good lesson to learn from their mistakes.
They spent too much on things they didn’t need. They didn’t budget.
As the new DirectTV commercials go: “Don’t be like this Peyton Manning”. “Don’t be like this Rob Lowe”.
Don’t be like these athletes.
Budget Smart, Invest Wise
I spoke with my sister who just recently graduated with student loan debt. She asked me, “How do I start paying back my loans?” I told her, I don’t know.
If you have recently graduated from college then chance are you have student loans to pay back. There is student loan exiting counselling you must go through and then it seems like you’re all finished.
This is exactly what I did. After I graduated I went through loan counselling sometime during the late summer of 2012. And then… Nothing. I don’t even believe I received an email until almost six months later when it was time to start paying back my loans. My grace period was coming to an end.
If you take out a student loan through your college or university you will most likely have a grace period of six months. This is so you can have time to “Get your finances in order”. I assume these loan company figure if you were this easy to get into debt it was the least they could do.
The bad part about this “Grace Period” is that interest is accruing during the six months you aren’t paying back your loans. The loan companies try their best to hide this from you and make it as difficult as possible to figure out how to pay back your loans before the period is over.
Step 1: Log on to https://studentaid.ed.gov/sa/?login=true and find out who your student loan provider is.
Step 2: Create an online account with your provider(s) and set up your account information.
Step 3: Begin paying back your loans before the grace period ends to limit the amount of interest you will pay over the life of the loan.
Budget Smart, Invest Wise